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  • Court approves additional settlements in CFPB student debt relief action

    Courts

    On September 8, the U.S. District Court for the Central District of California entered a stipulated final judgment against two additional defendants in an action brought by the CFPB, the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney alleging a student loan debt relief operation deceived thousands of student-loan borrowers and charged more than $71 million in unlawful advance fees. As previously covered by InfoBytes, the complaint alleged that the defendants violated the Consumer Financial Protection Act, the Telemarketing Sales Rule, and various state laws by charging and collecting improper advance fees from student loan borrowers prior to providing assistance and receiving payments on the adjusted loans. Four defendants settled in August, with a total suspended judgment of over $95 million due to the defendants’ inability to pay and total payments of $90,000 to Minnesota, North Carolina, and California, and $1 each to the CFPB, in civil money penalties.

    The new final judgment holds the two relief defendants liable for nearly $7 million in redress; however, the judgment is suspended based on an inability to pay. The defendants are not subject to any civil money penalties, but are required to relinquish certain assets and submit to certain reporting requirements.

    Courts CFPB Student Lending State Attorney General CFPA Telemarketing Sales Rule UDAAP Debt Relief

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  • FTC settles with student debt relief operation for $835,000

    Federal Issues

    On September 9, the FTC announced an $835,000 settlement with the operators of a student loan debt relief operation, resolving allegations against five individuals (collectively, “defendants”) whom the FTC claims engaged in deceptive marketing and charged illegal upfront fees. According to the November 2019 complaint, filed in the U.S. District Court for the Central District of California against the defendants and several others, the defendants allegedly used telemarketing calls, as well as media advertisements, to enroll consumers in student debt relief services in violation of the FTC Act and the Telemarketing Sales Rule. The defendants allegedly misrepresented that they were affiliated with the U.S. Department of Education and misrepresented “material aspects of their debt relief services,” including by promising to enroll consumers in repayment programs to reduce or eliminate payments and balances. Additionally, the defendants charged illegal upfront fees, and often placed the consumers’ loans into temporary forbearance or deferments with their student loan servicers, without the consumer’s authorization.

    The settlement order includes a monetary judgment of over $43 million, which is partially suspended due to the defendants’ inability to pay. The defendants “will be required to surrender at least $835,000 and additional assets, which will be used for consumer redress.” Additionally, the defendants are prohibited from providing student debt relief services in the future and they must cooperate in the FTC’s pursuit of the case against the remaining defendants.

    Federal Issues FTC Telemarketing Sales Rule FTC Act Deceptive UDAP Student Lending Debt Relief

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  • Court approves settlements in CFPB student debt relief action

    Courts

    On August 26 and 28, the U.S. District Court for the Central District of California entered two final judgments (see here and here) against four of the defendants in an action brought by the CFPB, the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney alleging a student loan debt relief operation deceived thousands of student-loan borrowers and charged more than $71 million in unlawful advance fees. As previously covered by InfoBytes, the complaint alleged that the defendants violated the Consumer Financial Protection Act, the Telemarketing Sales Rule, and various state laws by charging and collecting improper advance fees from student loan borrowers prior to providing assistance and receiving payments on the adjusted loans. In addition, the complaint asserts the defendants engaged in deceptive practices by misrepresenting (i) the purpose and application of fees they charged; (ii) their ability to obtain loan forgiveness; and (iii) their ability to actually lower borrowers’ monthly payments.

    The finalized settlements suspend a total judgment of over $95 million due to the defendants’ inability to pay, and requires the two defendants who settled on August 26, to pay a total of $75,000 to Minnesota, North Carolina, and California, and $1 each to the CFPB, in civil money penalties, and the two defendants who settled on August 28, to pay a total of $15,000 to the respective states and $1 to the CFPB in civil money penalties. In addition to the monetary penalties, the defendants are required to relinquish certain assets and submit to certain reporting and recordkeeping requirements. All four defendants neither admit nor deny the allegations, as part of the settlements.

    Courts CFPB Student Lending State Attorney General CFPA Telemarketing Sales Rule UDAAP Debt Relief

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  • District court enters $13.9 million judgment in FTC robocall action

    Courts

    On July 27, the U.S. District Court for the Middle District of Florida entered a nearly $13.9 million partially suspended judgment against six corporate and three individual defendants (collectively, “defendants”) allegedly operating an illegal robocall scheme offering consumers credit card interest rate reduction services in violation of the FTC Act and the Telemarketing Sales Rule. The action is part of a 2019 FTC crackdown on illegal robocalls named “Operation Call it Quits,” which included 94 enforcement actions from around the country brought by the FTC and 25 other federal, state, and local agencies (covered by InfoBytes here). According to the complaint, the defendants made deceptive guarantees to consumers that, for a fee, they could lower their credit card interest rates to zero percent permanently for the life of the credit card debt. However, the FTC alleged that not only do consumers not see a permanent reduction on their credit card interest rates, in some instances, the defendants obtained new credit cards with promotional “teaser” zero percent interest rates that only lasted a limited time, after which the interest rates increased significantly. Moreover, the defendants allegedly failed to tell consumers that they would have to pay additional bank or transaction fees. In addition, the complaint contended that the defendants also (i) initiated illegal telemarketing calls to consumers, including many whose phone numbers appear in the National Do Not Call Registry; (ii) tricked consumers into providing personal financial information, including social security numbers and credit card numbers; and (iii) in many instances, applied for credit cards on behalf of consumers who did not agree to use the service without their knowledge, authorization, or express informed consent.

    The court’s order enters a nearly $13.9 million judgment, which will be partially suspended due to inability to pay. The defendants are also prohibited from collecting or assigning any right to collect payments from consumers who purchased the service, and are permanently banned from, among other things, engaging in the illegal behaviors involved in the action and from using the information obtained from consumers during the robocall operation.

    Courts FTC Enforcement Debt Relief Consumer Finance TSR FTC Act UDAP

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  • District court shuts down operation claiming debt relief for students

    Federal Issues

    On July 20, the FTC announced that the U.S. District Court for the Central District of California issued a final judgment permanently banning defendants in a student loan debt relief operation from telemarketing or providing debt relief services. As previously covered by InfoBytes, in 2019 the FTC charged the defendants with violations of the FTC Act and the Telemarketing Sales Rule (TSR) for allegedly, among other things, (i) charging borrowers illegal advance fees; (ii) falsely claiming they would service and pay down borrowers’ student loans; and (iii) obtaining borrowers’ credentials in order to change consumers’ contact information and prevent communications from loan servicers.

    The court’s order granted the FTC’s motion for summary judgment, finding that the defendants received revenues of at least $31.1 million derived unlawfully from payments received from borrowers due to the defendants’ violations of the FTC Act and TSR. Of these revenues, only about $3.1 million had been paid by the defendants to borrowers’ federal student loan servicers, the order stated, although the court noted that the defendants allegedly refunded about $408,089 to consumers. The court imposed a roughly $27.6 million judgment against the defendants as equitable monetary relief, and permanently banned the defendants from offering similar services in the future, including misrepresenting, or assisting others in misrepresenting, any facts materials to a consumer’s decision to purchase financial products or services.

    Federal Issues Courts FTC Enforcement Student Lending Debt Relief FTC Act TSR

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  • CFPB takes action against student debt-relief operation

    Federal Issues

    On July 13, the CFPB filed a complaint in federal district court against a nationwide student loan debt-relief business—consisting of two companies, their owners, and four attorneys—for allegedly charging thousands of customers approximately $11.8 million in upfront fees in violation of the Telemarketing Sales Rule (TSR). According to the complaint, filed in the U.S. District Court for the Central District of California, the companies would market its debt-relief services to customers over the phone, encouraging those with private loans to sign up with an attorney to reduce or eliminate their student debt. The attorney agreement typically provided for “a fee, typically 40 [percent] of the outstanding debt, to be paid by monthly installments, along with a processing fee that costs an additional $10 per month.” The business allegedly charged the fees before the consumer had made at least one payment on the altered debts, in violation of the TSR’s prohibition on requesting or receiving advance fees for debt-relief service or, for certain defendants, the TSR’s prohibition on providing substantial assistance to someone charging the illegal fees.

    On August 17, the court approved stipulated final judgments with four of the defendants (one company owner and three of the attorneys, here, here, and here). The company owner is permanently banned from providing debt-relief services or engaging in telemarketing of any consumer financial product or service, and is required to pay $25,000 in partial satisfaction of a suspended $11.8 million in redress. Similarly, the three attorneys are each banned from providing debt-relief services and required to pay $5,000, $21,567, and $30,000 each in partial satisfaction of various redress amounts. Additionally, the judgments impose a civil money penalty of $1 against each defendant.

    Federal Issues CFPB Debt Relief Lead Generation Enforcement Courts Student Lending Consumer Finance TSR

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  • CFPB proposes settlement with student debt-relief operation

    Federal Issues

    On July 8, the CFPB announced a proposed settlement with a Florida-based student debt-relief company and three of its owners and officers (collectively, “defendants”), which would resolve allegations that the defendants violated the Telemarketing Sales Rule (TSR) by charging advance fees for services to renegotiate, settle, reduce, or alter the terms of federal student loans. According to the complaint, filed with the U.S. District Court for the Southern District of Florida on the same day as the proposed order, the Bureau alleges that from 2016 through October 2019, the defendants used telemarketing campaigns to solicit over 7,300 consumers to pay up to $699 in fees to have their federal student loan monthly payments reduced or eliminated through government-offered programs. The Bureau alleges that—not only are government programs (such as loan consolidation, income-based repayment, or certain loan-forgiveness options) available without charge—the defendants violated the TSR by charging and receiving upfront fees from consumers for their services before the terms of the student debt had been altered or settled.

    On August 12, the court entered a stipulated final judgment and order, which permanently bans the defendants from providing debt-relief services and imposes a suspended $3.8 million in consumer redress, upon the owners and officers each paying between $5,000 and $10,000 individually. Additionally, each defendant is required to pay $1 in civil money penalties.

    Federal Issues CFPB Settlement Telemarketing Sales Rule Student Lending Debt Relief Enforcement

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  • CFPB settles claims with debt relief executive

    Courts

    On July 7, a settlement was reached with another of the defendants in action taken by the CFPB against a mortgage lender and several related individuals and companies (collectively, “the defendants”) for alleged violations of the Consumer Financial Protection Act (CFPA), Telemarketing Sales Rule (TSR), and Fair Credit Reporting Act (FCRA). As previously covered by InfoBytes, the CFPB filed a complaint in January in the U.S. District Court for the Central District of California claiming the defendants violated the FCRA by, among other things, illegally obtaining consumer reports from a credit reporting agency for millions of consumers with student loans by representing that the reports would be used to “make firm offers of credit for mortgage loans” and to market mortgage products, but instead, the defendants allegedly resold or provided the reports to companies engaged in marketing student loan debt relief services. The defendants also allegedly violated the TSR by charging and collecting advance fees for their debt relief services. The CFPB further alleged that defendants violated the TSR and CFPA when they used telemarketing sales calls and direct mail to encourage consumers to consolidate their loans, and falsely represented that consolidation could lower student loan interest rates, improve borrowers’ credit scores, and change their servicer to the Department of Education. An $18 million settlement was reached with several of the defendants in May (covered by InfoBytes here).

    The settlement reached with the chief operating officer/part-owner of one of the defendant companies requires the defendant to pay $25,000 of a $7 million settlement—of which the full payment will be suspended provided several obligations are fulfilled. The defendant, who neither admits nor denies the allegations, is permanently banned from providing debt relief services and from accessing, using, or obtaining “prescreened consumer reports” for any purpose. The defendant is also prohibited from using or obtaining consumer reports for any business purposes aside from “underwriting or otherwise evaluating mortgage loans.” The defendant is further required to, among other things, (i) pay a $1 civil money penalty; (ii) comply with reporting requirements; and (iii) fully cooperate with any other investigations.

    Courts CFPB Settlement Debt Relief CFPA TSR FCRA Credit Report

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  • New York AG settles with student debt relief defendants

    State Issues

    On June 25, the U.S. District Court for the Southern District of New York entered a stipulated final judgment and order to resolve allegations concerning an allegedly fraudulent and deceptive student loan debt relief scheme. According to the New York attorney general, the defendants allegedly sold debt-relief services to student loan borrowers that violated several New York laws, including the state’s usury, banking, credit repair, and telemarketing laws, as well as the Credit Repair Organizations Act, the Telemarketing Sales Rule, and TILA. The order imposes a $5.5 million judgment against the majority of the defendants, which will be partially suspended after certain defendants pay $250,000. The AG’s case against one of the defendants, however, will continue. The order also prohibits the defendants from engaging in unlawful acts or deceptive practices such as false advertising, and, among other things, imposes compliance and reporting requirements and permanently bans the defendants from offering, providing, or selling any debt relief products and services or collecting payments from consumers related to these products and services.

    State Issues State Attorney General Student Lending Debt Relief Usury TILA Telemarketing Sales Rule

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  • New York AG settles with debt relief company for $3.6 million

    State Issues

    On June 23, the New York attorney general announced a $3.6 million proposed settlement with a debt relief operation for allegedly making exaggerated advertisements in violation of a 2011 consent order with the state. According to the press release, the 2011 consent order was based on allegations that the company engaged in “illegal, fraudulent, and deceptive practices” related to advertising. The 2011 consent order permitted the company to advertise certain savings if those savings were achieved by a defined group of New York consumers and if the company “clearly disclosed which consumers were in that group and what approximate percentage of the whole group of New York consumers the defined group represented.” However, the attorney general alleges the company failed to follow this requirement and continued to advertise consumer savings without disclosing the details of the group who achieved the savings, noting that “the majority of New York consumers achieved less than half of the savings [the company] advertised.”

    In addition to the $3.6 million in restitution for the New York consumers, the proposed settlement reinforces the 2011 consent order’s injunctive provisions and requires the company to (i) acknowledge that certain high savings numbers are not typical by “[e]xpressly stating the percentage of consumers who achieve the high end range of savings claims”; and (ii) ensure that future savings claims are based on consumers’ total debt with the company’s program.

    State Issues State Attorney General New York Settlement Debt Relief

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